New Jersey § 12a:3-305

§ 12a:3-305.

a. Except as stated in subsection b. of this section, the right to enforce the obligation

of a party to pay an instrument is subject to the following: (1) a defense of the obligor based on infancy of the obligor to the extent it is a

defense to a simple contract, duress, lack of legal capacity, or illegality of the

transaction which, under other law, nullifies the obligation of the obligor, fraud

that induced the obligor to sign the instrument with neither knowledge nor reasonable

opportunity to learn of its character or its essential terms, or discharge of the

obligor in insolvency proceedings; (2) a defense of the obligor stated in another section of this chapter or a defense

of the obligor that would be available if the person entitled to enforce the instrument

were enforcing a right to payment under a simple contract; and (3) a claim in recoupment of the obligor against the original payee of the instrument

if the claim arose from the transaction that gave rise to the instrument; but the

claim of the obligor may be asserted against a transferee of the instrument only to

reduce the amount owing on the instrument at the time the action is brought. b. The right of a holder in due course to enforce the obligation of a party to pay

the instrument is subject to defenses of the obligor stated in paragraph (1) of subsection

a. of this section, but is not subject to defenses of the obligor stated in paragraph

(2) of subsection a. of this section or claims in recoupment stated in paragraph (3)

of subsection a. of this section against a person other than the holder. c. Except as stated in subsection d. of this section, in an action to enforce the

obligation of a party to pay the instrument, the obligor may not assert against the

person entitled to enforce the instrument a defense, claim in recoupment, or claim

to the instrument (12A:3-306) of another person, but the other person's claim to the

instrument may be asserted by the obligor if the other person is joined in the action

and personally asserts the claim against the person entitled to enforce the instrument. An obligor is not obliged to pay the instrument if the person seeking enforcement

of the instrument does not have rights of a holder in due course and the obligor proves

that the instrument is a lost or stolen instrument. d. In an action to enforce the obligation of an accommodation party to pay an instrument,

the accommodation party may assert against the person entitled to enforce the instrument

any defense or claim in recoupment under subsection a. of this section that the accommodated

party could assert against the person entitled to enforce the instrument, except the

defenses of discharge in insolvency proceedings, infancy, and lack of legal capacity.